Resources

Upcoming Changes to Childcare

November 2016

What do the upcoming changes to childcare mean for employers?

There are several changes and government consultations underway to do with childcare over the next few years that employers, especially those that offer childcare benefits to their employees, need to be aware of.

Tax-Free Childcare Scheme

The government is planning to launch its new Tax-Free Childcare scheme in early 2017 in order to try and enable more parents to be able to get back into work. The scheme will be available for parents of children up to the age of 12 who are each earning between £115 a week and not more than £100,000 each per year. The scheme works by the parents creating an online account, through the government website, and paying for their childcare through this. For every £8 they put into it, the government will top it up with a further £2, the amount of tax most people would pay, 20%. The government will top it up with the 20% increase up to a total of £10,000 – the equivalent of £2,000 support per child per year. It is also worth highlighting that the scheme will also be available for those who are self-employed, a group of people the government were looking to increase support for. Employer-Supported Childcare will continue to operate for as long as employers want to keep it going, but will close to new entrants in April 2018.

For employers this means that eventually they will have to stop providing childcare vouchers as a way of saving National Insurance contributions in salary sacrifice schemes. The government has acknowledged that it is trying to cut down on some of these salary sacrifice benefits and has begun a consultation on salary sacrifice for the provision of benefits-in-kind. However, for the immediate future, employers won’t have to change anything as it won’t be until April 2018 that Employer-Supported Childcare will stop registration of new entrants. It is something that employers are going to have to re-examine in the future as other similar restrictions to their abilities to offer these schemes means other employee incentives will have to be sought.

Grandparent Leave Consultation

The government is also currently consulting on expanding the current shared parental leave and pay system to include grandparents, allowing childcare to be shared more widely amongst a family. The government hopes to implement this change, depending upon the consultation, by 2018. They hope it will not only allow parents the option of returning to work more quickly but will also encourage more grandparents to remain in employment, rather than retire from their jobs earlier to help with childcare.

30 hours Free Childcare Expansion

This scheme is less relevant to employers but further shows the government’s desire to get parents back into work. It is already in place for 1- and 2-year olds but from September 2017 the government is planning on expanding it to cover 3- and 4-year olds too. Currently that age group only gets 15 hours free childcare a week so by increasing this it allows for more parents to get back into work full time.